Financing for Vermont Businesses and Farms

Vermont Agricultural Credit Corporation Organic Transition Loan Program

The Vermont Agricultural Credit Corporation (VACC), a component unit of the Vermont Economic Development Authority (VEDA), the Working Lands Enterprise Board (WLEB) and the Vermont Agency of Agriculture, Food & Markets (VAAFM) together have developed a loan program to assist conventional dairy farmers to transition to organic milk production. The goal is to improve the long-term financial viability of the farms that participate in the Program by enabling them to receive the higher price that organic milk demands in the marketplace. Program funds can be used by borrowers to offset certain costs of transitioning to organic production as outlined below. VAAFM, through funding provided by its WLEB, is subsidizing the interest cost on the loans for the borrower for a period of time, and VACC has also agreed to defer principal payments on the loans for a period of time as outlined below:

Eligibility

  • Dairy farms currently engaged in conventional milk production and planning to transition to organic production are eligible to apply for a loan. These applicants may be organized as sole proprietorships, corporations, partnerships or limited liability companies. These farmers must meet the definition of "farmer" as outlined in VACC's enabling legislation and potential applications are encouraged to contact a VACC loan officer to ensure that they meet these eligibility requirements. 

Use of Proceeds

  • Loan proceeds may be used to cover operation and/or capital expenses incurred during the transition, including those related to infrastructure improvement, transition of land base and/or dairy herd, changes in cropping methods, and operating losses or extra costs related to the transition. 

Loan Rates and Terms

  • Program Loans to eligible and qualified borrowers may be approved between August 15, 2016 and August 14, 2018. The interest rate on the loans will be VACC's initial variable rate for the first two years, which may increase if the variable rate increases. VAAFM through WLEB will pay this interest expense to VACC on behalf of the borrower beginning at loan closing and ending on the earlier of the two years from the date of the loan closing or 60 days after the farm receives it's certification to ship organic milk. If the borrower's organic transition is terminated for any reason, the subsidy on the loan will also be terminated. VACC also intends to defer principal loan payments for a similar time period. 
  • The term and amortization of the loan will be determined by VACC staff in consultation with the borrower, based on VACC guidelines and the projected cash flow of the borrower.
  • Loans will be secured by liens on chattels, and/or mortgages on real estate as the VACC Staff may determine is appropriate.

Borrowing Parameters

  • The maximum loan size in the program is $200,000.

Fees

  • 0.5% commitment fee (with $250 minimum and $2,500 maximum);
  • $25 credit report fee;
  • Appraisal reimbursement (if required unless loan is denied);
  • Document recording/discharge fees.

Other Requirements

  • Borrower agrees to consult with Northeast Organic Farming Association of Vermont, which will provide 2 - 4 consultations with the borrower regarding organic-specific technical assistance during the first two years of the program and loan term. 

Application Process